Xiaomi Launches New Xring Chip, Partners with TSMC for Production, Sources Say

Chinese smartphone maker Xiaomi unveiled a new version of its in-house Xring handset processor on Monday, betting that deeper control over key components will strengthen its supply chain and reduce reliance on external chip suppliers. The introduction of the Xring O3 comes a year after Xiaomi launched its first proprietary smartphone processor, marking the latest step in the world's third-largest smartphone vendor's push to join rivals such as Apple, Samsung, and Huawei in developing their own chips.

TSMC will manufacture the new chip using its 3-nanometre production technology, two people familiar with the matter said. One source said the chip is expected to power Xiaomi's upcoming flagship folding phone, with a shipment target of 200 000 to 300 000 units. Xiaomi's expansion into foldable phones – a more expensive market segment – could challenge leading domestic player Huawei, which shipped 1.6 million foldable phones in China in the second quarter, giving it a 68% market share.

Industry Context and Financial Performance

Xiaomi's chip push reflects a broader industry trend as device makers seek to differentiate products and lessen dependence on suppliers such as Qualcomm and MediaTek amid intensifying competition in premium smartphones. Xiaomi said during an earnings call last week that cumulative shipments of devices powered by the Xring O1, including smartphones, tablets, and watches, had surpassed 1 million units since its launch.

Smartphone makers are contending with a global downturn in device sales, as memory and component costs push up prices and squeeze demand. Xiaomi sold 65 million handsets in the first half of 2026 at an average price of 1 329 yuan ($197.74), compared with 84 million units sold at an average price of 1 141 yuan in the same period of 2025, according to data from Visible Alpha by S&P Global. Global smartphone shipments are expected to decline 14% in 2026, according to International Data Corporation.

Xiaomi said it had also contracted TSMC to manufacture two other Xring chips: the Xring O100, a 6-nm neural processing unit that will support Xiaomi's large language model, MiMo, on consumer electronic devices, and the Xring D100, a 3-nm chip for autonomous driving. The O3 has already entered mass production, while the O100 and D100 have completed development and are slated for deployment next year.

Market Sentiment: 

The sentiment is cautiously positive, reflecting Xiaomi's strategic push into in-house chip development as a means to differentiate its products and reduce supply chain dependency. The launch of the Xring O3 — manufactured on TSMC's advanced 3-nm process — signals Xiaomi's commitment to competing in the premium smartphone segment, particularly in the foldable phone market where Huawei currently dominates with a 68% share.

The shipment target of 200 000 to 300 000 units for the upcoming flagship folding phone is modest but represents a meaningful entry into a high-value segment. The additional chips in development — the O100 (6-nm NPU) for AI applications and the D100 (3-nm) for autonomous driving — indicate Xiaomi is broadening its semiconductor ambitions beyond smartphones, which could reduce its reliance on smartphone market volatility.

However, the broader context is challenging: global smartphone shipments are expected to decline 14% in 2026, and Xiaomi's own handset sales have dropped from 84 million in H1 2025 to 65 million in H1 2026, though average selling prices have risen. This suggests Xiaomi is shifting towards higher-value products, supported by its in-house chip strategy.

The partnership with TSMC provides manufacturing credibility, but Xiaomi's chip volumes remain small relative to industry leaders. The company's ability to scale production and improve chip performance will be key to long-term success. The next catalysts will be the commercial success of the O3-powered folding phone and progress on the O100 and D100 chips. The sentiment is constructive, but execution and market acceptance remain key risks.

The market is watching for signs of tangible differentiation and market share gains. The outlook is positive, but the path to profitability in the premium segment remains challenging. The next few quarters will be critical in demonstrating the value of the in-house chip strategy.

Disclaimer:
This content has been generated using AI technology and is intended for informational purposes only. While efforts have been made to ensure accuracy and relevance, this text should not be considered professional advice or an official statement. Always verify information from authoritative sources before making any decisions. This is not financial advice.